Mukherjee to ease banking licence rules

Pranab Mukherjee in his Budget speech said the government is planning to open up the banking sector saying that the Reserve Bank of India (RBI) is considering giving banking licences to private sector players and non-banking financial companies (NBFCs).

This is a a great news for India's prominent industrial houses such as the Tatas, the Birlas and Anil Ambani-led Reliance group as a change in regulatory environment will boost the ambitions of these entities to enter the banking sector.

Besides India's top industrial houses, many other private sector groups and NBFCs, the Aditya Birla Group, Tata Capital, Religare group and the Muthoot Group, have been eyeing a banking licence.

The minimum net worth requirement for new banks id currently Rs300 crore, and the present norms do not allow any single entity or group of related entities to hold over 10 per cent in a private bank.

Many analysts see this as a pleasant surprise as RBI last issued licences to private banks way back in 2002 to Kotak Mahindra Bank and Rabo Bank.

Ever since many experts have been harping on the idea of issuing licences to private players, but policy makers have so far managed to resist such pressure.